According to the IRS, political and legislative activities are two separate types of operations within exempt organizations. Each has their set of rules and consequences based on the following criteria:
The scope or amount of the activity conducted
The type of operated activity – Political or Lobbying
The type of tax-exempt organization – Section 501(c)(3) or Private Foundations
Restrictions on Political Activities The Internal Revenue Code strictly prohibits your typical section 501(c)(3) organizations in taking part in any political campaigns with a candidate running for an elective public office. Furthermore, any contributions to political campaign funds for an electoral candidate violates IRS policy and can lead to loss of exemption status.
While the IRS approves certain activities and expenditures that are mildly political, there are also specific types of exempt organizations that are allowed to participate in political campaigns fully – their involvement is carefully regulated as well.
Restrictions on Political Contributions Exempt organizations like trade associations, labor unions, or similar groups can contribute to a political candidate, campaign committee, or newsletter fund; however, these donations are not tax deductible. Any expenses such as an advertisement or admission benefiting a political party or candidate are also non-deductible.
These tax-exempt organizations involved in politics and lobbying are also ineligible for getting tax-deductible, charitable contributions – this means that if a taxpayer donates to organizations like these, the amount isn’t considered deductible for the taxpayer’s personal tax return.
Monetary Limits There’s only so much the law allows organizations to contribute towards a political cause. Both parties – the one giving and the one receiving – are equally responsible for not exceeding past the limits.
An organization can donate a maximum of:
$100 in cash to any political committee
$33,400 per calendar year to a national party committee
$10,000 per calendar year to a state or local party committee
$5,000 per calendar year towards a political action committee
$2,700 per election to a federal candidate or campaign committee
If your tax-exempt organization is eligible to participate in lobbying activities or give political contributions, you are required to submit a Schedule C along with your IRS Form 990 or Form 990-EZ. With ExpressTaxExempt.com, schedules are automatically generated based on your form interview answers – the information you enter loads onto the proper schedule and is transmitted with your 990 form directly to the IRS.
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